Now, Pope Francis has the beginnings of a point about large “private corporations” (note the oxymoron), which in their wealth may grow (though only temporarily) to a size rivalling the smaller national governments. And I would add, they become nearly as centralized and monopolistic (through “regulatory capture”), and faceless and bureaucratic as the agencies of State. Whenupon, unlike the self-perpetuating agencies of the State, they begin to disintegrate from their own lack of enterprise.
It is not enough, as the libertarians suppose, to leave them to their fate, in the knowledge that if they are inefficient they’ll be gone tomorrow. For new large corporations rise to take their place, and at every moment the great majority of people are reduced to wage-slaves of one large corporation or another. Indeed, part of the power of large corporations comes from their scale as employers. A democratic government which tries to stand up to them will quickly relent, and switch to subsidies instead, when they threaten to create mass unemployment.
The question must be asked: What makes vast, morally obtuse, centralized corporations possible? And the answer should be easy to see. It is vast, morally obtuse, centralized governments, which command regulatory regimes that are consistent over huge areas. That has actually become our model for global “free trade”: making regulations and taxation consistent not only across nations, but across continents. This creates an order which large corporations, and only large corporations, are well-equipped to exploit.
Imagine instead they were to face different regulatory regimes, parish by parish. They could still operate, but would have to adapt each franchise to local conditions, as defined by the sovereign local authority. This immediately flips the onus, and gives the local merchant or producer the advantage over his multinational competitor, in being on the spot. It reduces that competitor’s economy of scale, while also imposing upon him a new model of corporate governance, as network, that must of necessity become decentralized and responsive (just as creatures in nature) to every single environmental niche.
The re-focusing on what is local, and what is doable locally, would have tremendous ramifications on “the environment” at large — overwhelmingly positive, given some time. Yet it would also have the happy effect of disempowering the ecological whack cases.
David Warren, “Five thousand max”, Essays in Idleness, 2015-06-19.
May 14, 2017
QotD: Big business, crony capitalism and regulatory capture
May 1, 2017
Math is hard … and in Oregon it can lead to hard time
Did you know that you have to be certified by an Oregon regulatory agency to do certain kinds of math? Mats Järlström has discovered just how draconian the state can be about unauthorized mathematizing:
After exploring the math behind traffic light timing, Järlström concluded that the formula, created in 1959, accounted for only two yellow light scenarios: driving straight through the intersection, or stopping.
So Järlström decided to try to improve the math managing the transition time from yellow to red, in order to allow a driver traveling through an intersection with a yellow light to slow down and turn without being flagged for a red light violation. And in early 2015 he shared his proposal with the media, policymakers, and those interested in the traffic technology.
“It’s not rocket science,” Järlström said in a phone interview with The Register. “It took me about 40 minutes to figure it out.”
For communicating his findings in five emails, the Oregon State Board of Examiners for Engineering and Land Surveying in March, 2015 opened an investigation. In August 2016, the rules body found [PDF] that Järlström had engaged in unlicensed engineering and assessed a $500 fine.
Even better, if he persists, he may even face jail time for his unlicensed mathematical crime spree.
Järlström paid the fine but fears his ongoing interest in traffic light timing will lead to further penalties. Violating the Act could subject him to $1,000 in civil penalties, $6,250 in criminal fines, and as much as a year in jail.
April 21, 2017
The oddly appropriate subtext to New York’s “Fearless Girl” statue
In the New York Post, Nicole Gelinas points out that Mayor De Blasio has set a precedent that might well come back to bite the city (the example she cites would be “Black Lives Matter protesters want a statue of police brutalizing a black man in front of One Police Plaza”. She also explains why the statue highlights an uncomfortable detail about the role of women on Wall Street:
But the bigger problem with Fearless Girl is that it casts stereotypes in bronze: Men do important things, and women get in the way.The “Fearless Girl” statue faces the Arturo Di Modica “Charging Bull” on Wall Street (Wikipedia)
The bull is the primary actor: He is charging. The girl’s job is to impede him. This is how Wall Street has long worked — and it’s changing, but slowly.
Take the management committee of State Street’s parent company. Of its 14 members, two are women. One, the chief administrative officer, is a top regulatory official. The other is the human-resources chief and “citizenship officer.”
On Goldman Sachs’ 33-member management committee, five of our women — at least four of whom are in similar, growth-restraining positions.
Yes, growth-restraining: These are great jobs and require deep skill. But they’re bureaucratic rather than entrepreneurial. If a department head — a man — wants to start up a new unit, it’s the regulatory experts who will say, no, you can’t.
Similarly, a trading head may want to hire someone — but the human-resources chief nixes it.
Indeed, the area of “compliance” — which sounds like an S&M activity but has to do with ensuring that the bank and its employees don’t launder money, steal or do other bad things — is where women have done well.
[…]
This work is necessary. A company can’t grow if it’s convicted of money-laundering or if its employees are thieves (in theory).
But it’s also the depressing age-old relationship: A man wants to do something fun and cool, like take the children paragliding before they’ve had a proper breakfast. His wife says, “But honey, the kids have band practice today, and maybe we should save the money for the mortgage.”
Fearless Girl fails in another way. It’s terrific to have courage and fight important battles. But it’s not a good idea — for men, women or children — to be recklessly fearless.
Fear is a good thing. If a bull is charging you, according to the farming manuals, the best thing to do is what you instinctively do: get out of the way. If you don’t pick your battles, you’ll lose them.
April 17, 2017
Why big organizations act like idiots (United Airlines is only the most recent example)
Charlie Martin knows about big corporations making themselves look foolish … and far too often doubling down on the stupid:
This whole recent thing with United Airlines has me thinking, once again, about how big organizations act like idiots. […]
Like all good consultants, I have a Model, mostly cribbed from others, based on two observations:
- The SNAFU principle: the farther up a hierarchy information has to travel, the more information is lost. This is because no one likes giving people bad news, so the news tends to get better the farther up it goes.
- The Peter Principle (modified): people rise in a hierarchy to the limits of their competence in rising in a hierarchy; further, the skill of rising in a hierarchy is largely independent of the skills needed to deal with actual issues.
Of course, the implication of this is something I’ve called Carl’s Corollary (for a friend and co-worker Carl Madison, who first pointed it out). Carl’s Corollary implies that most decisions are being made by people less and less competent to deal with the situation, using increasingly bad information.
Naturally, this results in bad decisions being made. The usual result is that once the bad decision has been made, someone is identified to be responsible, that person is punished, and a new policy is issued to make sure no one makes that mistake again.
[…]
United, though, has a different scheme, clearly. They have a Book, and it Must Be Followed. No one on the ground in Chicago — at least no one in reach of the gate — had the authority to do anything but offer an $800 voucher, which just wasn’t enough. (I can relate. I used to be a “45 weeks a year” road warrior, and there were some nights where if they’d have tried to bump me off a flight home, I would have either killed someone or just thrown myself on the floor of the terminal screaming.) So they followed the Book, and when they couldn’t get Dao to leave, they followed the book again saying he was disruptive, and then the mall airport cops went all Cartman on him…
https://media.giphy.com/media/B1TMcmoBAaSZi/giphy.gif
… and the rest was history.
Now, imagine if, instead, the gate people had the authority to offer more. And the gate agents knew their primary responsibility was to make customers happy and not get bad publicity.
April 16, 2017
The tale of unsalted butter in French cuisine
At his new blog, Splendid Isolation, Kim du Toit explains the historical roots of a French culinary oddity:
One of the quirks of French cuisine is that most often the butter is unsalted, and at a French dinner table you will usually find a tiny cruet of salt with a microscopic spoon inside, so that you can salt your butter (or not) according to taste. To someone like myself, accustomed only to salted butter, this seemed like an affectation, but it wasn’t that at all: it was the result of taxation, and this is one of the things changed forever by Napoleon’s administrative reforms.
One of the best parts of our U.S. Constitution is the “interstate commerce” clause, which forbids states from levying taxes on goods and services passing from one state to another, and through another in transit. This was not the case in pre-Napoleonic France. Goods manufactured in, say, Gascony or Provence would pass through a series of customs posts en route to Paris, and at each point the various localities would levy excise taxes on the goods, driving up the final price at its eventual destination.
Which brings us to salt. French salt, you see, was produced mainly on the Atlantic coastline, and was a major “export” of Brittany to the rest of France. Butter, of course, was produced universally — in and outside Paris and ditto for every major city — but the salt for the butter came almost exclusively from Brittany, and having been taxed multiple times by the time it reached points east like Paris or Lyons, it was expensive. So the cuisine and eating habits in those parts developed without the use of salt — or, if salt was requested, at an added cost. It’s why, to this day, many French recipes use unsalted butter as an ingredient. (In contrast, butter for local consumption in western France was [and still is] almost always salted, because salt was dirt cheap there.)
Napoleon’s reforms did away with all that; he saw to it that the douane locale checkpoints and toll booths along the main roads were abolished (causing salt prices in eastern France to plummet and become a mainstay of French cuisine at last). And when the towns and villages protested about the loss of tax revenue, Napoleon made up the shortfall with “federal” funds out of the national treasury.
Of course, the French treasury had in the meantime been emptied out by, amongst other things, the statist welfare policies of the Revolutionary government (stop me if this is starting to sound familiar). Which is why, to raise money, Napoleon invaded wealthy northern Italy and western Germany (as it is now), pillaged their rich cities’ treasuries and garnered revenue from the wealthy aristocracy, who paid bribes to avoid having their palaces sacked and their wealth confiscated.
March 31, 2017
QotD: Government as Superman … reality as Kryptonite
… politics is all details. And each of those tiny little details has to be endlessly negotiated, because the system is set up precisely to frustrate a powerful guy with a big idea. You may recall your middle school social studies teacher talking about “checks and balances.” This is what that looks like. Kryptonite, if you will.
So there is no shortcut around the long days spent debating whether the tax credit should be 3.45 percent or 3.65 percent, and drafting pages of legislation that amend some obscure subclause of the immigration code to read “that” rather than “which,” and ending up with a middling, pork-riddled program that costs too much and doesn’t do anything close to what its visionary proponents promised.
Governing is not like building a building; it’s not like running a business. It’s like, well, trying to herd three branches of government in roughly the same direction. These branches are composed of thousands of people, each of whom has their own agenda, and represents millions more, each of whom has their own agenda, and will hound out of office anyone who strays too far from it. This is a wildly ponderous and inefficient way to do anything, which is why I am a libertarian; almost anything can be done better when you’re not trying to build it by a committee.
But in a representative democracy, this is what we have. There is no superhero strong enough to overcome the villain. There is actually not even a villain to defeat, only the unslayable amoeboid agglomeration of 300 million citizens’ worth of unenlightened self-interest. In the immortal words of P.J. O’Rourke: “Every government is a parliament of whores. The trouble is, in a democracy the whores are us.”
Megan McArdle, “Voters Want Change. Candidates Disappoint. Repeat.”, Bloomberg View, 2015-08-21.
March 14, 2017
DIY Biohacking Can Change The World, If the Government Allows It
Published on 13 Mar 2017
Biohackers, much like their computer hacker forebears, prefer asking for forgiveness rather than permission.
March 11, 2017
QotD: US Army awards contract, losing bidder launches appeal (of course)
The Services should just acknowledge the reality of contracting anything in the seven-figure realm, and change initial award announcements to read: “The Initial Conditional Award of Contract XYZ is to Defense Conglomerate 1369. Work will commence after all Congressional Outraged Publicity-Seeking Posturing is exhausted and Butthurt Losing Contractor Challenges are adjudicated. We hope to run both those actions concurrently, and anticipate work will commence a minimum of 3-5 years behind schedule and costs grow at an exponential rate during this period, hence the budget supplemental is already in draft form for Newsies, Think Tanks, and Outraged Congresspersons to grind axes with.” Added caveat for this particular contract: “Additionally, a website has been established to collect all the comments from .40/.45 cal and steel-frame fanboyz to rant about How Stupid This Choice Is.”
John Donovan, posting to Facebook, 2017-02-28.
February 23, 2017
QotD: Government failure is baked-in
One can build a very good predictive model of government agency behavior if one assumes the main purpose of the agency is to maximize its budget and staff count. Yes, many in the organization are there because they support the agency’s public mission (e.g. protecting the environment at the EPA), but I can tell you from long experience that preservation of their staff and budget will almost always come ahead of their public mission if push comes to shove.
The way, then, to punish an agency is to take away some staff and budget. Nothing else will get their attention. Unfortunately, in most scandals where an agency proves itself to be incompetent or corrupt or both (e.g. IRS, the VA, more recently with OPM and their data breaches) the tendency is to believe the “fix” involves sending the agency more resources. Certainly the agency and its supporters will scream “lack of resources” as an excuse for any problem.
And that is how nearly every failing government agency is rewarded for their failure, rather than punished. Which is why our agencies fail so much.
Warren Meyer, “Congress Almost Always Rewards Failed Government Agencies. Here is Why”, Coyote Blog, 2015-06-17.
February 5, 2017
QotD: Gaming the LEED certification for fun and profit
Some of my favorites include environmental building requirements tied to government contract approval. The LEED certification is such a joke. There are a ton of “real” categories, like motion detecting lights, solar / thermal filtering windows, CO2 neutral engineering. But if you can’t get enough of that, you can also squeeze in with points for “environmental education”. For instance, a display in the lobby discussing the three solar panels on the roof, or with a pretty diagram of the building’s heat pump system. You can end up getting a platinum LEED certification and still have the highest energy consumption density in the city of Chicago, as it turns out.
The proprietor of the Finem Respice blog, quoted by Warren Meyer, “Diesel Emissions Cheating, Regulation, and the Crony State”, Coyote Blog, 2017-01-14.
February 3, 2017
January 26, 2017
QotD: Why government intervention usually fails
We saw in an earlier story that the government is trying to tighten regulations on private company cyber security practices at the same time its own network security practices have been shown to be a joke. In finance, it can never balance a budget and uses accounting techniques that would get most companies thrown in jail. It almost never fully funds its pensions. Anything it does is generally done more expensively than would be the same task undertaken privately. Its various sites are among the worst superfund environmental messes. Almost all the current threats to water quality in rivers and oceans comes from municipal sewage plants. The government’s Philadelphia naval yard single-handedly accounts for a huge number of the worst asbestos exposure cases to date.
By what alchemy does such a failing organization suddenly become such a good regulator?
Warren Meyer, “Question: Name An Activity The Government is Better At Than the Private Actors It Purports to Regulate”, Coyote Blog, 2015-06-12.
January 24, 2017
QotD: Token ownership to game government mandates
I was researching energy shorts and had a ton of discussions with former regulatory types in the U.S. I was stunned to discover that there was widespread acknowledgement on the regulatory side that many regulations were impossible to comply with and so “compliance trump cards” were built into the system.
For instance, in Illinois you get favorable treatment as a potential government contractor if you “comply” with all sorts of insane progressive policy strictures. “Woman or minority owned business” or “small business owner”, as an example. Even a small advantage in the contracting process for (for example) the State of Illinois puts you over the edge. Competitors without (for instance) the Woman or Minority Owned Business certification would have to underbid a certified applicant by 10-15% (it’s all a complex points system) to just break even. It got so bad so quickly that the regs were revised to permit a de minimis ownership (1%). Of course, several regulatory lawyers quickly made a business out of offering minority or women equity “owners” who would take 1% for a fee (just absorb how backwards it is to be paying a fee to have a 1% equity partner) with very restrictive shareholder agreements. Then it became obvious that you’d get points for the “women” and “minority” categories BOTH if you had a black woman as a proxy 1% “owner.” There was one woman who was a 1% owner of 320 firms.
The proprietor of the Finem Respice blog, quoted by Warren Meyer, “Diesel Emissions Cheating, Regulation, and the Crony State”, Coyote Blog, 2017-01-14.
January 23, 2017
Five easy fixes to improve US federal health policies
Scott Alexander finds, to his surprise, that two of the candidates for the post of FDA commissioner in the Trump administration are following his blog or social media profile. To mark that, he offers five easy-to-implement policy fixes that would make a difference:
1. Medical reciprocity with Europe and other First World countries […] Right now, Europe has a licensing agency about as strict as the FDA approving medications invented in Europe. Any pharma company that wants their medication approved in both the US and Europe has to spend a billion or so dollars getting it approved by the FDA, and then another billion or so dollars getting it approved by the Europeans. A lot of pharma companies don’t want to bother, with the end result that Europe has many good medications that America doesn’t, and vice versa. Just in my own field, amisulpride, one of the antipsychotics with the best safety/efficacy balance, has been used successfully in Europe for twenty years and is totally unavailable here despite a real need for better antipsychotic drugs. If the FDA agreed to approve any medication already approved by Europe (or to give it a very expedited review process), we could get an immediate windfall of dozens of drugs with unimpeachable records for almost no cost. Instead, in the real world, we’re cracking down on imported Canadian pharmaceuticals because the Canadians don’t have exactly our same FDA which means that for all we know they might be adding thalidomide to every pill or something. This is exactly the sort of silly anti-competitive cronyist practice that a principled intelligent libertarian could do away with.
2. Burdensome approval process for generic medications […] How come Martin Shkreli can hike the dose of an off-patent toxoplasma drug 5000%, and everyone just has to take it lying down even though the drug itself is so easy to produce that high school chemistry classes make it just to show they can? The reason is that every new company that makes a drug, even a widely-used generic drug that’s already been proven safe, has to go through a separate approval process that costs millions of dollars and takes two to three years – and which other companies in the market constantly try to sabotage through legal action. Shkreli can get away with his price hike because he knows that by the time the FDA gives anyone permission to compete with him, he’ll have made his fortune and moved on to his next nefarious scheme. If the FDA allowed reputable pharmaceutical companies in good standing to produce whatever generic drugs they wanted, the same as every other company is allowed to make whatever products they want, scandals like Daraprim and EpiPens would be a thing of the past, and the price of many medications could decrease by an order of magnitude. […]
3. Stop having that thing allowing companies to “steal” popular and effective drugs that have been in the public domain for years, claim them as their private property, shut down all competitors, and jack up the price 10x just by bringing them up to date with modern FDA bureaucracy.
4. Stop having that thing where drug companies can legally bribe other companies not to compete with them. I like this one because it sounds anti-libertarian (we’re imposing a new regulation on what companies can do!) but I think it’s exactly the sort of thing that the crony capitalists would never touch but which principled intelligent libertarians like O’Neill and Srinivasan might be open to, in order to bring more actors into the marketplace.
5. Stop thwarting consumer diagnostic products and genetic tests […] Srinivasan comes from the genetic testing world himself, so he’s likely to be extra sympathetic to this.
January 22, 2017
QotD: Conflict of interest
I am not sure that this is a suitable subject for a blog post, probably more a project for an aspiring PhD student, but with all the discussion of conflicts of interest in the Trump cabinet, it strikes me that the most glaring conflict in the public sector is ignored: The CoI between state and local politicians elected with the support of public sector unions who then participate in compensation negotiations for the members of those unions. Here the temptation of the politicians to buy the support of the unions with public money is overwhelming. The impact of this is potentially trillions when public pension liabilities are included.
This is such an obvious conflict that I have looked to see if there are laws preventing this, but my initial research shows nothing.
It would be interesting to see if there is a statistical relationship between union support and subsequent pay rises. I would expect this relationship to be especially strong with deferred compensation (such as pensions) since this is very difficult for voters to monitor and can be easily gamed with unrealistic assumptions about, for example, investment returns.
Roger Barris, quoted by Tyler Cowen, “Understudied conflicts of interest in American government”, Marginal Revolution, 2017-01-11.
